August 15, 2001


Reforms that would change the management and direction of public infrastructure investment may be in order, according to a new study by economist Andrew Haughwout.

The author explains that current government spending on infrastructure development appears to promote the movement of households and firms from dense urban environments to the surrounding suburbs. Yet recent research shows that the clustering of producers and consumers in a given area, such as central cities, is economically and socially beneficial. Accordingly, Haughwout recommends the creation of regional government agencies with the power to select and finance projects that promote an area’s overall well-being. These "infrastructure investment authorities" would most likely direct a larger share of infrastructure investment to the central cities, Haughwout suggests.

The study, Infrastructure and Social Welfare in Metropolitan America, will be published in an upcoming issue of the New York Fed’s Economic Policy Review.

Contact: Steven Malin

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